Money and Banking (part – II)

Land development banks provide long-term funds for various agriculture related projects besides development of land and business. The borrowing capacity of a member is generally determined according to the number of shares he holds in the bank. The loans granted by land development bank is typically repayable within a 20 to 30-year period. Normally, loans are granted up to 50% of the value of the land or up to 30 times the revenue. Loans are granted only after a thorough verification of security title-deeds as well as the necessity for the loan. The rates of interest for LT loans are generally low and within the paying capacity of farmers. They are around 11 to 12%.
The sources of funds of land development banks can include:
1. Share capital from state or private sources
2. Deposits from members or non-members
3. Issue of debentures
4. Accepting deposits
5. Reimbursements of subsidies from the government
6. Other funds

About District Central Co-operative Banks (DCCBs)

• A DCCB is a rural cooperative bank operating at the district level in various parts of India.
• It is established to provide banking to the rural hinterland for the agricultural sector, with the branches primarily established in rural and semi-urban areas.
• DCCB provides finance to all the co-operative societies in the district, and conduct the activities and provide banking services according to the provisions of the co-operative act and banking act.
• They act as a link between the primary credit co-operative society and the State Co-operative Bank.
• At the district level, DCCB works as a banker of state government. Educational institutions, Zilla Parishad, Panchayat Samiti, Gram Panchayat, cooperative societies, etc have accounts in this bank.
• All the financial transactions of co-operative sector are conducted through DCCB.
  DCCBs have three sources of funds:

          Their own share capital and reserves

         Deposits from the public and

         Loans from the state co-operative banks

• The main functions of the DCCBs are
• To meet the credit requirements of member-societies
• To perform banking business
• To act as a balancing centre for the Primary Agricultural Credit Societies (PACS) by diverting the surplus funds of some societies to those which
  face shortages of funds
• To undertake non-credit activities
• To maintain close and continuous contact with PACS and provide leadership and guidance to them
• To supervise and inspect the PACS and
• To provide a safe place for the investment of the resources of PACS
• They also lend directly to the public for non-agricultural purposes within the area of operation of their branches.

About District Central Co-operative Banks (DCCBs)

• A DCCB is a rural cooperative bank operating at the district level in various parts of India.
• It is established to provide banking to the rural hinterland for the agricultural sector, with the branches primarily established in rural and semi-urban areas.
• DCCB provides finance to all the co-operative societies in the district, and conduct the activities and provide banking services according to the provisions of the co-operative act and banking act.
• They act as a link between the primary credit co-operative society and the State Co-operative Bank.
• At the district level, DCCB works as a banker of state government. Educational institutions, Zilla Parishad, Panchayat Samiti, Gram Panchayat, cooperative societies, etc have accounts in this bank.
• All the financial transactions of co-operative sector are conducted through DCCB.
  DCCBs have three sources of funds:

          Their own share capital and reserves

         Deposits from the public and

         Loans from the state co-operative banks

• The main functions of the DCCBs are
• To meet the credit requirements of member-societies
• To perform banking business
• To act as a balancing centre for the Primary Agricultural Credit Societies (PACS) by diverting the surplus funds of some societies to those which
  face shortages of funds
• To undertake non-credit activities
• To maintain close and continuous contact with PACS and provide leadership and guidance to them
• To supervise and inspect the PACS and
• To provide a safe place for the investment of the resources of PACS
• They also lend directly to the public for non-agricultural purposes within the area of operation of their branches.

About District Central Co-operative Banks (DCCBs)

• A DCCB is a rural cooperative bank operating at the district level in various parts of India.
• It is established to provide banking to the rural hinterland for the agricultural sector, with the branches primarily established in rural and semi-urban areas.
• DCCB provides finance to all the co-operative societies in the district, and conduct the activities and provide banking services according to the provisions of the co-operative act and banking act.
• They act as a link between the primary credit co-operative society and the State Co-operative Bank.
• At the district level, DCCB works as a banker of state government. Educational institutions, Zilla Parishad, Panchayat Samiti, Gram Panchayat, cooperative societies, etc have accounts in this bank.
• All the financial transactions of co-operative sector are conducted through DCCB.
  DCCBs have three sources of funds:

          Their own share capital and reserves

         Deposits from the public and

         Loans from the state co-operative banks

• The main functions of the DCCBs are
• To meet the credit requirements of member-societies
• To perform banking business
• To act as a balancing centre for the Primary Agricultural Credit Societies (PACS) by diverting the surplus funds of some societies to those which
  face shortages of funds
• To undertake non-credit activities
• To maintain close and continuous contact with PACS and provide leadership and guidance to them
• To supervise and inspect the PACS and
• To provide a safe place for the investment of the resources of PACS
• They also lend directly to the public for non-agricultural purposes within the area of operation of their branches.

Large cooperative banks with paid-up share capital and re- serves of Rs. 1 lakh were brought under the purview of the Banking Regulation Act, 1949 with effect from 1st March 1966, (through an amendment in the Act), and within the ambit of the Reserve Bank's supervision. This marked the beginning of an era of duality of control over these banks. Banking related functions (viz. licensing, area of operations, interest rates, etc.) were to be governed by RBI while registration, management, audit and liquidation, etc. were governed by State Governments through Registrars of Cooperative Societies as per the provisions of respective State Acts. Recently, the Banking Regulation (Amendment) Act, 2020, came into force with effect from June 29, 2020 for Primary (Urban) Co- operative Banks. The BR (Amendment) Act expanded the RBI's regulatory control over cooperative banks in terms of management, capital, audit and liquidation, etc.

Hence, statement 1 is incorrect while statement 3 is correct. As per BR (Amendment) Act, 2020, a cooperative bank may issue equity shares, preference shares or special shares on face value or at a premium to its members or to any other person residing within its area of operation. However, such issuance will be subject to the prior approval of the RBI, and any other conditions as may be specified by the RBI. Hence, statement 2 is correct.

These banks in India, broadly, come under the dual control of:

• Reserve Bank of India: Under the Banking Regulation Act, 1949, and the Banking Laws (Application to Co-operative Societies) Act, 1965, the RBI is responsible for regulating banking aspects of these banks, such as capital adequacy, risk control, and lending norms.
• Registrar of Co-operative Societies (RCS) of respective State or Central Government: They are responsible for regulation of management-related aspects of these banks, such as incorporation, registration, management, audit, supersession of board of directors, and liquidation.